Legislative leaders suggest some form of help will come

JenniferWaters

AugustCole

The industry's largest trade group, the Air Transport Association, said carriers are in deep trouble and need government help for war-related expenses.

In a late-day report, the ATA said advance bookings are exacerbating last week's traffic slowdown.

In the first week of war, worldwide demand for flights fell 23 percent, led by a 25 percent plunge over the Atlantic. Flights throughout the U.S. were off 7 percent.

But looking ahead, bookings for the next 60 days to 90 days "suggest no relief is in sight," ATA said. Domestic bookings swung lower by more than 20 percent while Atlantic bookings plummeted further to 40 percent declines. Latin flights are down 15 percent while those across the Pacific toppled deeper than 30 percent.

"Airlines have reported that on some days cancellations are exceeding bookings," the ATA reported. In the first few days after the Thursday launch of the war, ATA tallied more than 10,000 jobs eliminated as capacity was drastically cut back systemwide.

The industry has suggested that it will rack up losses of $4 billion during the war and is asking for federal aid to cover the costs of some government-mandated security measures as well as help on high-risk insurance premiums.

"It is imperative that Congress offer specific relief for the economic consequences of the war," ATA Chief James May insisted. "We are seeking mitigation of the damage being done by the nonmarket impacts from the war."

Not to worry, legislative leaders said en masse Wednesday, echoing Senate Majority Leader Bill Frist's comments a day earlier after it was clear President Bush made no room for the airlines in his $74.7 billion supplemental budget to Congress.

Kay Bailey Hutchison of Texas told Reuters that a group meeting with Frist is working on $1.5 billion to $3 billion relief package for the industry.

When asked if he would offer an airline aid proposal next week, Alaska Sen. Ted Stevens, chair of the Appropriations Committee said he would "at least" offer something in committee.

Senate Minority Leader Tom Daschle told reporters that help for the airlines continues to be "the subject of a good deal of discussion."

Given comments by various political leaders, it doesn't appear that any aid will be tied into what is generally referred to as "the supplemental," or Bush's add-on budget.

Meanwhile, Merrill Lynch analyst Michael Linenberg cautioned that the "unknown" is how much relief the government will throw in.

"Too much financial support would likely retard an industry restructuring," he said in a note to clients. "On the other hand, this is an industry that has been overtaxed and burdened with numerous charges."

All this chatter didn't provide an ounce of support to the airline sector, which ended a rocky session with the Amex Airline Index ($XAL) firmly in the red at 31.41, off 1.4 percent.

Shares of UAL Corp. slipped modestly after the parent of bankrupt United Airlines reported a February net loss of $367 million, an amount in line with terms imposed by lenders.

On an operating basis, United posted a loss of $307 million last month.

"Our results for the past three months show that United has made good progress in restructuring its operations and finances," said Jake Brace, UAL's chief financial officer. At the end of February, United was sitting on $1.5 billion in cash, a decrease of $300 million from the beginning of the month.

The No. 2 airline noted that fallout from the U.S.-led war with Iraq might mean additional temporary pay cuts if the military campaign to unseat Saddam Hussein drags on.

Other carriers have recently made similar announcements regarding the impact on air travel, and Wall Street has been reacting accordingly.

At the close, UAL
UAL, -1.33%
fell a penny, or 1.2 percent, to 84 cents. Rival AMR Corp.
AMR, +1.30%
parent of American Airlines, lost earlier momentum to slide by 6 cents, or 2.7 percent, to $2.19.

Delta Air Lines
DAL, -0.23%
reversed the other way, rising 14 cents, or 1.4 percent, to close at $9.95. Continental Airlines
CAL, +0.13%
added on 5 cents to $5.89.

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